Brand Autopsy

By now you’ve heard Starbucks is introducing an instant coffee product. It’s a just add water and stir packet called VIA. Okay. Fine. That’s cool. Starbucks has long-dabbled with concentrated instant coffee.

For the past ten years, the Frappuccino ice-blended drinks you’ve been enjoying have been made using a powdered coffee concentrate. And the bottled Frappuccino drink from Pepsi uses concentrated coffee as its base. So concentrated instant coffee isn’t new for Starbucks.

What is new … is how Starbucks is positioning this product. Howard Schultz, Starbucks ceo and chairman, is talking about how VIA will "disrupt and reinvent the instant coffee category."

That’s right, "disrupt and reinvent the instant coffee category."

Hmm … priorities seem to be misplaced.

Shouldn’t Starbucks be more concerned with disrupting and reinventing their core retail business and not the instant coffee category?

Lack of rejuvenating their core retail business has resulted in closing nearly 1,000 locations, the loss of almost 6,000 jobs, and the marginalization of the Starbucks brand.

Selling instant coffee isn’t an instant fix to solving Starbucks problems. It’s a distraction, not a solution.

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Excuse the multiple coffee-related postings today. Last one for a long time. I promise.

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In a cost-saving move, Starbucks no longer requires its stores to have brewed Decaf coffee ready-to-serve after 12 noon. (You can read all the hubbub on StarbucksGossip here and here.)

Dunkin' Donuts is again sniping at Starbucks. This time, Dunkin' is chiding Starbucks for its cost-savings Decaf decision with a creative print ad that includes this brilliant line, "We don't work around our schedule, we work around yours."

(Ouch, Starbucks. Ouch.)

Kudos to AdFreak for the hook-up.

Writing for the MarketingProfs blog, Ted Mininni posted his take on a recent McDonald’s ad for their McCafe coffee drinks. His post begins …

”Score one for McDonald’s... at the expense of Starbucks and all of the other high-brow coffee shops peddling pricey lattes, cappuccino, espresso and all manner of caffeinated concoctions.”

His post continues by declaring pretentious coffee is out and affordable coffee is in. Right on, I agree with his point given today’s dismal economy.

The comments to his post are lively and run wild. Definitely worth reading.

In the comments, Ted mentions how “Eight O'Clock beat out Starbucks. Go figure.” This triggered a long-dormant thought that is no longer dormant. Read below for my comment to Ted on this.

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Ted … I gotta chime in again. You mentioned how 8 o’Clock Coffee beat Starbucks Coffee on taste. True. And Dunkin’ Donuts is touting the taste of its coffee is preferred over Starbucks. Yep. Got it.

Starbucks has never fared well in taste tests. That’s because the taste of Starbucks coffee is too polarizing. Many people say Starbucks coffee tastes too bitter, too burnt, too bold. Starbucks has always had a strong point-of-view about what coffee should taste like. That strong point-of-view about coffee has helped to build its brand.

In the book PURPLE COW, Seth Godin smartly writes … “In almost every market, the boring slot is filled. The product designed to appeal to the largest possible audience already exists, and displacing it is awfully difficult. The real growth comes with products that annoy, offend, don't appeal, are too expensive, too cheap, too heavy, too complicated, too simple — too something."

8 o’Clock Coffee makes boring coffee. Boring coffee is not going to annoy, nor will it offend people. Conversely, non-boring coffee will annoy and offend people. 8 o’Clock Coffee has never been a growth brand. Starbucks, with its non-boring taste profile, has been a growth brand. HAS BEEN, being emphasized.

I offer up that Starbucks has been slouching towards boring coffee for years. The biggest coffee push from the company recently has been behind Pike Place Roast. This is a mild coffee meant to appeal to the masses, which means it’s meant to be boring. Problem is, the Starbucks brand was built on strong, polarizing coffee … not boring coffee.

As Starbucks has grown to over 16,000 locations worldwide, it has tried to tone down its strong point-of-view on coffee in order to appeal to even more people. In my opinion, that’s hurt more than it has helped.

The company has abandoned its strong point-of-view about how “good” coffee should taste. This abandonment has wrecked havoc on its brand. In its attempt to appeal to everyone, Starbucks has lost those someones who enjoyed a coffee taste profile that isn’t watered down to a milder, more palatable and less offending taste.

Back in the day, the coffee Starbucks served earned an opinion from people because it wasn’t boring. These days, the company serves boring coffee (Pike Place Roast) and it no longer has a strong point of view about how good coffee should taste.

It’s my take … focusing on boring coffee has, more than the dismal economy, positioned Starbucks for the steep decline its experiencing.

Following the recent Starbucks news of more store closures, more layoffs, and more meandering into convoluted sales initiatives, Kevin Coupe says Howard Schultz must go. His argument breaks down the issues with Howard’s near-sighted business vision. It’s provocative and worthy of reading. Here's a snippet...

"It is my sense that Starbucks has lost its way, and that blaming the economic downturn misses the point. After all, great brands and great thought leaders find ways to transcend these kinds of challenges, profound as they may be. They find ways to reinforce the differential advantages of the brand, and to see the challenges and opportunities for strategic innovation.

Since Schultz took back the reins of the company a year ago, it has seemed like management has embarked on a series of tactical decisions designed for short-term fixes rather than long-term growth

This is not a diatribe against Howard Schultz. He should be lauded for his vision and service to the company. He should be praised for the fact that he was willing to give up his million-dollar-plus salary and work for a dollar a year while getting the company back on track. But it is time for a change, to someone who can think and act strategically rather than tactically." ***READ MORE***

[hat tip to Paul Williams]

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Starbucks Has Nothing To Lose - Freakin’ Go For It!

Attaboy Paul!

This blog has received lots of links from progressive-minded churches wanting to improve their marketing. It's my turn to reciprocate.

Just as churches can learn something from business marketers, business marketers can learn something from churches. Churches do things to turn off potential Christ-followers. And businesses do things to turn off potential customers.

In this video parable, the Beyond Relevance blog shares how churches subtly construct barriers to making new attendees feel welcome. Enjoy and learn ...

RSS Readers ... click here to watch the video.

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** Kudos to Danny Franks for the heads-up.

In July, I ranted about how there isn’t a faster way to commoditizing a brand than using unemotional and uncreative language. The example I used was Starbucks and this billboard:

I wasn’t knocking the billboard tactic as OOH advertising can be used effectively. I was knocking the fast food mentality of the copy used in the billboard.

Communicating a new and improved position is totally of the fast food mindset. And, to feel the need to say BETTER COFFEE is off-putting to me. (Shouldn't the Starbucks cup automatically convey Better Coffee? After all, the "Better Coffee" angle should be the culmination of everything Starbucks has strived to communicate to customers since its inception.)

The other week I noticed a new Starbucks billboard execution going eastbound to the Austin airport. It’s being used as a directional guide to support a just-opened Starbucks location nearby.

Kudos. The language/tone isn’t unemotional and uncreative. It’s (somewhat) interesting and functional. In other words … Better Billboard. Fresher. A marked improvement.

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SOURCE: Associated Press article

Starbucks offers afternoon drink deal nationwide

Looking to bring more value-seeking consumers through its doors for a late afternoon caffeine fix, Starbucks Corp. said it will now offer its morning customers any iced grande beverage for $2 after 2 p.m.

The price is a big cut from the normal price of most grande-sized iced drinks. A grande iced latte, for example, costs about $4. To get the discount, customers must present a receipt from their morning Starbucks visit.

"I think we've kind of hit the nail on the head," said Brad Stevens, vice president of customer relationship management. "It's easy for baristas to implement and it's easy for customers to understand."

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Sadly, this is yet another decision the company has made which has “… lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand." [SOURCE]

As marketers, we know PRICING TELLS A STORY. All high-priced products must deliver an interesting story to justify its higher price. On the other end, low-priced products settle for telling an uninteresting story, beyond simply getting goods on the cheap.

Reading in-between the lines I’m picking up on something even more alarming than the company’s decision to become a priced-to-sell retailer. I’m picking up on a cataclysmic shift in company culture.

Re-read the quote from Brad Stevens. He says the Two Buck ‘Bucks promotion “is easy” for employees to implement and for customers to understand. True. HOWEVER, the Starbucks we’ve come to appreciate developing a relationship with never did anything “easy.”

The Starbucks company culture has never been about doing things the easy way.

The easy way is to size drinks Small, Medium, Large, and Extra-Large.
The easy way is to roast coffee less for a mass appeal taste profile.
The easy way is to have lucy-goosey espresso making standards.
The easy way is to not offer part-time employees full benefits.
The easy way is to treat customers as just a transaction.
The easy way is to compete on low prices.

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The hard way is to size drinks Short, Tall, Grande, and Venti.
The hard way is to roast coffee longer for a more polarizing taste profile.
The hard way is to have strict espresso making standards.
The hard way is to offer every employee full benefits.
The hard way is to have employees build relationships with customers.
The hard way is to compete on high prices.

If we wanted “easy,” we would have never interrupted our old daily ritual to make Starbucks part of our new daily ritual. If Starbucks had always done things the EASY WAY, they wouldn’t have changed the game for how to build an endearing and enduring brand.

As for the decision to compete on low prices to drive traffic in the afternoon daypart with Treat Receipts … I’m troubled by this. Just as I was troubled when the company experimented earlier this year with selling a One-Dollar Cup o’ Joe.

Consider peeping the July issue of ARCHITECT magazine. The magazine asked five architect design firms to envision the rebirth of Starbucks. Interesting results ... lots of daydreaming esoteric fodder for design-types. The regular marketing-type in me likes the Modular Community Kitchen design from Studios Architecture.

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CLICK HERE to review all five rebirthing Starbucks design ideas.

As many of you know, I will occasionally ask if you would miss a specific company if it went out-of-business tomorrow. (It’s part of my Would You Miss series inspired by the book, MAVERICKS AT WORK.) The question is totally hypothetical, but the answers you’ve given are highly emotional.

This “Would You Miss” question is a great one to ask of any business because it tells us how well we have formed relationships with our customers. If a business has formed unfailing relationships with its customers, then customers would truly care if that company went out of business. On the other hand, if a business hasn’t formed meaningful bonds with customers, then customers wouldn’t care if that business ceased to exist.

With the recent announcement of Starbucks Coffee closing 600 under-performing locations, we get to witness this “Would You Miss” question in action. If the SaveOurStarbucks.com website is any indication, lots of people will miss Starbucks when their location is closed.

Now that Starbucks Corp. has disclosed the 600 locations it wants to shutter, a phenomenon is taking hold: the Save Our Starbucks campaign.

In towns as small as Bloomfield, N.M., and metropolises as large as New York, customers and city officials are starting to write letters, place phone calls, circulate petitions and otherwise plead with the coffee company to change its mind.

"Now that it's going away, we're devastated," said Kate Walker, a facilities manager for software company SunGard Financial Systems who recently learned of a store closing in New York City. [SOURCE: Wall Street Journal article]

Wow! “Now that it is going away, we’re devastated.” That’s the best thing a company could hope to hear from customers when it is dealing with severe business issues. Hmm ... would your customers be DEVASTATED if your business closed up shop?

I’m not as unsettled about Starbucks selling smoothies as I am about Starbucks approving this billboard:

LOCATION: Northbound & Southbound on I-35 (near Temple, TX)

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Sadly, this is another decision the company has made which has “… lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand." [SOURCE]

As marketers, we know there is not a faster, better, or cheaper route to commoditizing a brand than using unemotional language like: Faster … Better … Cheaper.

Back in the day, Starbucks marketers were coached to: (1) NEVER communicate like a fast food company; (2) NEVER convey a new and improved mindset; and (3) NEVER allow a tactic to take priority over the company’s heritage and personality.

Today is a different day. However, if Starbucks is to truly transform itself back to what in once was … it needs to also transform the language it uses.

Big news went down yesterday. Starbucks is closing 600 existing locations, cutting new store openings even further, and significantly reducing its workforce. This is on top of recently announcing a major reduction in their Starbucks Entertainment foray.

It’s official … Starbucks is no longer in growth mode. They are in PRUNE MODE.

We’ve talked about the need for Starbucks to prune its unwieldy garden before. And that vintage post from March 2007 takes on new relevance today. To better understand why Starbucks is in PRUNE MODE, re-read this post from the Brand Autopsy archives…

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first posted: March 17, 2007

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"I have said for 20 years that our success is not an entitlement and now it's proving to be a reality. Let's be smarter about how we are spending our time, money and resources. Let's get back to the core. Push for innovation and do the things necessary to once again differentiate Starbucks from all others." -- Howard Schultz email

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Paul Williams began this conversation about restoring Starbucks “coffee” identity by using the analogy of restoring antique furniture to its original state. He says Starbucks should strip off the extra layers of paint that have collected over the years. From there, he recommends Starbucks sandpaper away the rough spots and then apply a durable finish to intensify and highlight the unique grain of the Starbucks core. Interesting …

Maintaining the Starbucks Garden
Paul’s analogy to restoring the Starbucks brand luster, like one would restore antique furniture, got me thinking about gardening. Paul and I once played around with this gardening analogy back in the day. We were probably chomping on a Briazz sandwich at Starbucks HQ when we began drawing the connections between the role of gardener and our role as marketers.

When you look at it, the Starbucks business resembles a garden landscape. Hear me out …

The seeds of the business were first planted in 1971 with the three original founders of Starbucks playing the role of company gardener. As company gardeners, they carefully worked with the soil in the Pacific Northwest until it became fertile ground. At first, the soil wasn’t fertile enough for the roots of the company to take hold and grow. But after years of dedication and daily nurturing, the hard soil became fertile and Starbucks began to not only grow deep, healthy roots—it also began to blossom. By 1992, the Starbucks garden landscape was thriving with new growth happening. Throughout the 90s, Starbucks flowers were always in full bloom and its garden landscape was growing, and growing, and growing.

Today, the Starbucks garden is still growing, but its growth is unwieldy. Company gardeners are having a hard time managing the garden’s growth. An increasing number of new plants have sprouted in the Starbucks garden that do not belong there. Coffee plants have always grown in the Starbucks garden but today, there are more and more plants in the garden that resemble nothing like coffee. The Starbucks garden has become so cluttered by wildflowers and weeds that it’s hard to recognize where the coffee plants are. Because of the wildflower and weed clutter, the Starbucks garden has lost its identity.

It’s become apparent—the Starbucks garden needs major maintenance. It needs pruning.

Pruning promotes healthy growth. By pruning, gardeners are able to remove unwanted, unneeded, and unhealthy plants as well as limbs from trees. This reduction of plants and tree limbs will allow for more light and air into the garden, thus allowing for wanted and needed plants to grow in a healthy, sustainable manner.

To promote healthy growth, Starbucks needs to prune its business by removing unwanted, unneeded, and unhealthy elements from its business. Prune its Merchandise assortment. Prune its Entertainment division. Prune its New Store expansion. Prune its Automation Efficiency projects. Prune its partnership with Jim Beam. Prune everything that is causing Starbucks to lose its identity of sourcing, roasting, and serving the highest-quality coffee.

These pruning efforts will allow for Starbucks to rejuvenate its soul and refertilize its reason for existing. Then, and only then, will the Starbucks garden be able to grow in a much healthier, sustainable manner.

*** Read the full post here ***

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For those seeking extra credit, read the entire SOLVING STARBUCKS PROBLEMS series of posts.

Those in the medical field understand AMNESIA is a profound memory loss, usually the result of a traumatic event. Patients suffering from Amnesia have severe difficulty learning new information as well as remembering facts, events, and past experiences. Amnesia isn’t fatal. However, memory loss can be severe enough to require daily supervision from a caretaker. Coping rather than healing is the best case scenario for those suffering from Amnesia to live a somewhat productive life.

Marketing practitioners understand businesses can suffer from BRAND AMNESIA. When a business forgets its identity, disregards past learnings, and fails to learn new information … it has contracted BRAND AMNESIA.

I’m reminded of this marketing affliction from reading Janet Adamy’s dissection in the Wall Street Journal of Starbucks attempt to introduce a milder everyday coffee.

Earlier this year, as part of its much-discussed Transformation Agenda, Starbucks revamped its brewed coffee offerings. The Wall Street Journal explains the changes this way …

“Starbucks used to brew three types of coffee each day: one bold, one mild, and one decaffeinated. Now Starbucks outlets serve Pike Place Roast in regular and decaf versions every day. In the morning, stores also brew of the chain’s six bold flavors … but most Starbucks no longer brew a bold coffee after noon.”

Pike Place Roast is a milder coffee compared to the bolder, earthier blends and single-origin coffees Starbucks formed its identity from. Loyal Starbucks customers have voiced their displeasure for the daily coffee that some have called, “… weak, watery, and no substitute for the bold.”

While Starbucks doesn’t admit it, the focus on milder everyday coffee is in response to the encroaching competition of Dunkin’ Donuts and McDonald’s. Taste tests show Starbucks bolder flavors are polarizing and McDonald’s coffee has a more appealing taste.

As a marketing practitioner who has kept a detailed “Starbucks Marketing History” folder, this sounds like Déjà-Vu all over again. In the late 90's, Starbucks was hearing the same comments, mainly from the East Coast, that their bolder coffees were too polarizing and to acquire new customers, the company needed to address the “Charbucks” issue.

In response, Starbucks introduced Milder Dimensions in 1998. According to then Sr. Coffee VP, Mary Williams, Starbucks “… created Milder Dimensions(tm) in response to customer requests to experience a lighter Starbucks coffee. The milder flavor profile of this family offers the perfect introduction to Starbucks, as well as providing more coffee options without compromising quality."

Long story made short … despite its heavy in-store and out-of-store marketing attempts, Starbucks Milder Dimensions became a footnote in the company’s history. Customers never truly embraced the softer and simpler taste profile of this lighter-roasted coffee. Worse yet, Starbucks Partners (employees) never fully embraced the Milder Dimensions coffees because they believed the company’s identity is about bolder tastes and not lighter tastes. By 2003, after suffering through years of lethargic sales, the Milder Dimensions category was discontinued.

Ten years later, Starbucks repeats itself by introducing an updated version of its failed Milder Dimensions coffee—Pike Place Roast. As noted in the Wall Street Journal article, Starbucks customers have voiced displeasure with this softer and simpler coffee. And negative comments from Starbucks Partners litter the StarbucksGossip blog.

Marketing and medical practitioners know one’s history foretells one’s future. Milder Dimensions didn’t work in 1998 and Pike Place Roast isn’t going to work in 2008.

With hints of marketing dementia, Starbucks executives are declaring Pike Place Roast a success because drip coffee sales are on the rise. However, my unofficial Marketing Resonance Imaging (MRI) tests reveal fissures in Starbucks thinking.

Since Starbucks rarely promotes brewed coffee with in-store signage and out-of-store advertising, a reasonable assumption is that brewed coffee sales would increase even if it was Sumatra being promoted and not Pike Place Roast. The economic downturn also comes into play. With a sluggish economy, consumers are finding ways to trade down to lesser expensive options. It makes logical sense some Starbucks customers are forgoing their $4.25 Latte for a $1.80 cup of brewed coffee.

Furthermore, if indeed Pike Place Roast was a success, the company wouldn’t be backtracking and re-introducing bolder brewed coffee options in the afternoon.

Let’s circle back to the BRAND AMNESIA affliction. Businesses that suffer from Brand Amnesia experience profound memory loss, most likely from a traumatic event. Its clear Starbucks forgot its past history with the failed Milder Dimensions coffee line-up. Was there a traumatic event that caused Starbucks to begin suffering from Brand Amnesia? Traumatic doesn’t begin to describe how Starbucks has seen its stock price lose more than half its value in the past year, its earnings greatly diminished, and most traumatic … a significant drop in the number of customers visiting Starbucks in 2008 compared to 2007.

Here’s hoping Starbucks finds daily caretakers that are fully aware of the company’s history and can help the company cope with the onset of BRAND AMNESIA.

We know about the MyStarbucksIdea website, which Starbucks positions as a catch-all blog, customer feedback site, and social networking website. The reality is that website is an unfocused slush pile for customer generated ideas.

But how many of us know about Starbucks V2V? It’s a full-fledged social networking site to promote volunteerism with customers and Starbucks partners (employees). It’s under the radar at this point — participation solely by invitation — and has only been mentioned officially by the company as an update entry on MyStarbucksIdea.

Think Meetup meets LinkedIn and there you have Starbucks V2V (Volunteer 2 Volunteer). You can post a cause, an event, or an activity and have others join you. Easy enough to understand and simple enough to make happen.

Starbucks V2V has real promise. It’s clearly community-focused with a drive to making positive contributions to small corners around the world. By having profile pages for participants, it feels much more personal than does the way-too-sterile MyStarbucksIdea website.

If you dig a little deeper you’ll learn Starbucks V2V began in Brazil using technology developed by Comunitas. In a way, this is an International “best practice” that has been adopted by Starbucks North America. Cool.

My hope is Starbucks uses this full-fledged social networking site to endorse and develop a long-rumored “Starbucks Alumni” website. For years Starbucks has talked about setting up an Alumni network, but the job was always too daunting to begin. The technology clearly exists and the online usability is sufficient … which makes this Starbucks Alumni idea totally doable in 2008.

Why nurture relationships with ex-employees?

Well, many new hires at Starbucks were influenced by former Starbucks partners. Most ex-Starbucks employees had a positive time at the company and they’ve said good things to their friends about Starbucks. And for some of us, including me as a former Starbucks partner, we shared a common bond during our days at Starbucks. Reconnecting with former Starbucks colleagues on a company-endorsed website could potentially reignite the passions we all once had for Starbucks. That reignition of passion is something Starbucks could benefit from as it suffers through its “mid-life” crisis.

(It's nice to know my two-year old book still has some legs.)

Just got off the phone with a journalist writing a story about some of the marketing lessons I share in TRIBAL KNOWLEDGE. The journalist put together some tasty pull quotes from the book to help direct our conversation.

And since I'm obviously suffering from a severe case of blog drought, below are the money quotes the journalist pulled. Enjoy.

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“Companies that focus on delivering remarkable products and services attract significant attention from customers conditioned to a retail world in which the necessities are bought and sold without fuss or feeling.” (Page xiii)

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“Companies that put their money behind their brand and not their business fail to realize that the business is the brand.” (Page 6)

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“Starbucks learned the most effective way to spend its marketing dollars is not on making funnier television commercials but rather on making better customer experiences.” (Page 10)

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“…lasting brand loyalty is built on making the common uncommon…” (Page 11)

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“Measuring the reputation of a brand can and should be as simple as measuring the reputation of a company – something that is earned through purposeful execution and not merely fabricated to exploit a worthwhile business opportunity.” (Page 24)

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“The challenge for a company that chooses to open its doors – and grow its business – based on quality products and services and quality customer experiences is that it has only one shot to make a meaningful customer connection. Customers will overcome their aversion to higher prices if the product or service they are buying is well worth it.” (Page 32)

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“Businesses can simplify sales strategies by focusing on acquiring new customers; getting current customers to buy more, more often; and/or raising prices. It really is that simple.” (Page 40)

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“Growth was and is encouraged, and made possible, by wanting to meet the desires of customers more than wanting to meet sales or profit projections…Starbucks’ steadfast drive to become the best coffee retailer has resulted in its being the biggest coffee retailer. It can often work out that way…but it never seems to work in the reverse.” (Page 51)

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“What is the benefit of the benefit of your best-selling product or service? Think about its most important feature and make it more personal, until you’ve reached the ultimate experience your customers derive from it.” (Page 59)

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“Needs are basic. Needs are rational. Needs are boring. Needs have been commoditized. Every unremarkable business seems to be in the needs-fulfilling business. Wants are emotional. Wants are aspirational. Wants are thrilling. Wants are where the profits are. Only truly remarkable businesses are in the business of satisfying customer wants by helping customers actualize their aspirations.” (Page 96)

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“Delivering on promises is not enough today. Businesses, big or small, must find ways to over-deliver on their promises, implied and expressly stated, to customers…The most important part of over-delivering on promises to customers is having conscientious employees who make over-delivering a part of their everyday on-the-job way of life.” (Pages 103-104)

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“…experiences provide customers with rich and compelling stories to share with others, while products typically satiate immediate, basic needs.” (Page 136)

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“The best internal culture a company could hope for is one where the employees are so loyal they spread word of the company and its product with fierce passion, a culture where employees go way beyond being minions to being missionaries.” (Page 157)

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“Brands are made possible by people because, unlike products and services, competitors cannot replicate a brand’s promise, or their passion.” (Page 189)

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“Starbucks doesn’t view profit and the maximizing of profits as business strategy. The company views profit as an outcome. The mindset at Starbucks is, profit happens as a direct result of doing everything else right.” (Page 225)

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Further learning:
>> TRIBAL KNOWLEDGE | Amazon link
>> TRIBAL KNOWLEDGE Manifesto | ChangeThis website
>> ALL THINGS STARBUCKS | Brand Autopsy postings

WHAT
Net income for Q2 2008 at Starbucks fell by $42-million compared to the same quarter last year. (Ouch.) Additionally, Starbucks is drastically reducing the number of new store openings in the U.S. Starbucks opened nearly 1,800 locations in 2007. For 2008 the company will open only 1,175 new locations — that’s a 35% reduction in new store openings from the prior year. And, beginning in 2009 through 2011, Starbucks will limit new store openings to only 400 per year.

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SO WHAT
Clearly the company is experiencing growth troubles in the U.S. However, Starbucks is hoping to offset the slower domestic growth with greater international growth. Starbucks is set to open up anywhere from 1,050 to 1,300 new international locations each year through 2011.

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WHAT NOW
Have a listen to this interesting story on Starbucks from NPR’s Morning Edition. (Skip to the 3:10 mark in the story for a surprise.)

Nathan Snell runs the social media voodoo down with smart analysis of MyStarbucksIdea.com. And when you read Shel Holtz's take on how Starbucks mirrors Dell, be sure to read the comments where Caroline Dietz from Dell provides clarification.

In the comments section, a former long-time Starbucks partner questions just how much the MyStarbucksIdea.com website will engage readers and engage Starbucks. ”Pat’s" comments got me thinking more about Starbucks social media strategy. Below is my reply to "Pat" …

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Pat … I’m also not sold on Starbucks jumping into the deep end of the social media waters. The company has no meaningful experience in social media and has always shunned participating in online conversations.

Instead of opening the customer suggestion box floodgate, which is exactly what MyStarbucksIdea is, I would have started by taking a much smaller step and simply layered on a blog-like component to their existing website. On this proposed company blog, Starbucks could ask customers focused questions about their ideas on improving various aspects of the Starbucks business.

For example, a potential Starbucks blog post could read something like…

”As you’ve heard, we are discontinuing our oven-heated breakfast sandwiches. This doesn’t mean we are exiting the breakfast business. It does mean we are looking for morning food ideas that customers will enjoy more. I’m sure you have ideas on what food we should offer in the morning. Please share. We are listening.”

Another potential Starbucks blog post could say …

”When we launched the Starbucks Card in 2001, we had no idea it would be accepted by so many of our customers. 15% of you purchase all your Starbucks stuff on the Card. That’s amazing! Thank you. We want to “thank” Starbucks Card users even more. Please share your ideas on how we can reward you for your continued devotion to Starbucks.”

The company could reply to customer suggestions to these focused questions in the comments section. Starbucks could do a weekly round-up of the most popular ideas and post updates on which ideas are moving forward.

This focused approach to (a) participating in social media and (b) gathering customer suggestions would be easier for a company with no meaningful social media experience to manage. It would also make it easier for Starbucks customers to follow-along. The current MyStarbucksIdea website is already unwieldy — lots of wayward ideas have been suggested and many of the ideas suggested are repeated numerous times in various categories. This website will only get more unwieldy.

A more focused approach to participating in the social media waters would probably have been a better path for Starbucks to undertake.

johnmoore (from Brand Autopsy)

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A friend pointed me to some interesting videos showing the Clover Brewer in action. (Thanks Mr. Garraway.)

Turns out there is a coffee shop in Austin that uses one -- J.P.'s Java. (I feel a field trip coming on.)

If you have no idea why I am blogging this, read this.

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Since I have lots of HMOs (hot marketing opinions) about Starbucks, reckon I should share my take on today’s major goings-on with the company. Since there’s lots to talk about, I’ve arranged my thoughts in a “WHAT | SO WHAT | WHAT TO THINK” format.

** WARNING … LONG POST **

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WHAT?
At its 2008 Shareholders Meeting, Starbucks announced six initiatives designed to: (a) improve the current state of its U.S. business, (b) reignite the emotional connection with customers, and (c) invest for long-term success.

The six initiatives are:
1 | New Espresso Machines
2 | Ethically-Sourced Coffees
3 | A Social Media Strategy
4 | A Customer Rewards Program
5 | Improved Brewed Coffee
6 | Acquisition of the Clover Brewing machine

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SO WHAT?
1 | New Espresso Machines
Starbucks will phase out its current automated espresso machine, known as the Verisimo, for a higher-quality automated machine. The new Mastrena machine is also an automated machine, but Starbucks believes the quality of espresso and steamed milk is superior to that of their current machine. Starbucks plans to have the Mastreno in 30% of U.S. locations by the end of 2008 and in 70% of U.S. locations by 2010.

2 | Ethically Sourced Coffees
Starbucks will further its relationship with Conservation International in a variety of ways. Customers will notice this relationship with a certification seal on select coffees judged to have been grown and sourced using stringent standards. By the end of 2009, every Starbucks espresso drink prepared around the world will be used with coffee beans certified by Conservation International as being ethically grown and sourced.

3 | Social Media Strategy
Starbucks is following the lead of companies like Dell by introducing a website where customers can submit their ideas on how Starbucks can improve its business. MyStarbucksIdea.com is the company’s first meaningful foray into social media. Howard Schultz will blog here and 48 Starbucks employees will be assigned to engage in conversations with customers on the website.

4 | Customer Rewards Program
Customers with registered Starbucks Cards will able to receive free syrups and free milk options (soy, half & half) when they order espresso drinks. In other words, customers using their registered Starbucks Card will only have to pay for a Grande Latte when they order a Grande Extra Vanilla Light Hazelnut Soy Latte. (The free modifiers do not include shots of espresso.)

Additionally, Starbucks Card customers will also receive 2-hours of free daily in-store wi-fi, free refills on brewed coffee, and a free 12-oz. beverage (espresso, coffee, or Frappuccino) when they buy a pound of whole bean coffee. These are only the initial rewards Starbucks Card holders are set to receive in April. The company plans to add-on more rewards in the months to come.

5 | Improved Brewed Coffee
Starbucks is changing its policies for brewing coffee in-store. They will be brewing in smaller batches and reducing the hold time for brewed coffee from 60-minutes to 30-minutes. Plus, the company will no longer rely on pre-packaged ground coffee filter packs and instead, grind whole bean coffees in-store to brew as drip coffee. A new blend, Pike Place Roast, will be introduced and brewed as an everyday coffee.

6 | Acquisition of the Clover Brewing machine
Coffee geeks rave about the Clover Brewer and high-end coffee shops have been using the Clover Brewer to brew richer, more flavorful coffee. Starbucks has been selling brewed coffee using the Clover Brewer in selected locations in Seattle and Boston. Results of the test have been promising. So promising, Starbucks is acquiring the Coffee Equipment Company, makers of the Clover Brewer. Starbucks has plans to rollout the Clover Brewer to a limited number of locations.

UPDATE: to watch the Clover Brewer in action, click here.

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WHAT TO THINK?
We were promised to learn of transformational initiatives that would reverse the negatives trends impacting the company. We learned of six initiatives. I'm not sure how transformational these initiatives will be.

Let’s judge these transformational initiatives against the objectives Starbucks outlined at the Shareholders Meetings. Will these six ideas (a) improve the current state of its US business, (b) reignite the emotional connection with customers, and (c) invest for long-term success.

1 | New Espresso Machines
The introduction of the Mastrena espresso machine is clearly an investment for long-term success. Starbucks says they will roll-out this new machine to 30% of its U.S. locations by year’s end. We’re talking over 2,000 locations—that’s highly aggressive. Given all the issues of production, distribution, installation, and employee training, Starbucks will be fortunate to have the Mastrena espresso machine in 1,000 locations by year’s end.

Expect this new espresso machine to have little financial impact on Starbucks business in 2008. As for reigniting the emotional connection with customers … that’s hard to measure. Let’s just say friendlier Starbucks baristas will reignite the emotional connection with customers more than an espresso machine ever could.

2 | Ethically Sourced Coffees
It’ll be 2009, when espresso drinks are made with Conservation International certified coffees, before this initiative can improve Starbucks U.S. business. With customers that value environmental issues and origin country matters, this initiative will help to build a stronger emotional connection with them. I’m not sure how many Starbucks customers are emotionally-tied to such issues. However, any activity designed to be friendlier to the environment and to coffee origin countries will be a good long-term investment.

3 | Social Media Strategy
Hmm … I applaud Starbucks for diving into the social media waters. (Really, I do.) I’m just concerned they haven’t done their homework. Chris Bruzzo, Starbucks chief technology officer, made the following statement when introducing the MyStarbucksIdea.com website, “I am not aware of another organization that is investing in making this kind of a commitment to integrate customers and their ideas and their insights into the products and experiences that they develop.”

So we are to believe Starbucks is unaware of Dell’s social media activities with Direct2Dell and more importantly, IdeaStorm. Starbucks can learn a lot from what Dell has done and is doing with social media to better connect with customers.

This marks a major cultural shift within the company. Starbucks has never participated in the online conversational media. It’s not like they can flip the switch to on. Its not that easy. (Just ask Dell.)

Time will tell if Starbucks customers are engaged by this online activity. Time will also tell if Starbucks corporate culture will adapt to social media and when (or if) Starbucks will implement customer ideas. Right now the most popular customer generated idea is for the company to implement a Buy 9 Drinks Get 1 Free punch card. That’s a marketing activity the company abolished a long time ago. How will Starbucks respond now?

4 | A Customer Rewards Program
Clearly, Starbucks is seeking to drive sales by getting current customers to buy more, more often. Offering Starbucks Card customers free syrups and free refills is just the first step in what looks to be a more involved “loyalty program.” This has the potential to drive sales in 2008 and to reignite the connection with customers. The future is a different story. Once Starbucks heads down the path of offering customers discounts, they will have a hard time ever reversing course.

5 | Improved Brewed Coffee
The vast majority of beverage sales at Starbucks, as measured by total dollars, come from espresso drinks, not brewed coffee. Improving their brewed coffee policies is a positive move that the company should have made years ago. Will these changes, including the introduction of Pike Place Roast as an everyday coffee, move the sales needle? No. Improve the emotional connection with customers? No. Be a sound investment for the future? Yes.

6 | Acquisition of the Clover Brewing machine
These new high-end brewers will only impact a small number of stores. Since these brewers make single cups of coffee on-demand, volume selling of drip coffee will not be possible. The Clover brewer will not have an immediate impact on sales in 2008. It does have the potential to impact the future business of Starbucks. Because this appeals to only coffee connoisseurs, I’m not convinced the typical Starbucks customer will care.

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Where do we stand? Let’s take a look at the Transformational Agenda Scorecard…

It appears these six initiatives will have an impact on the long-term Starbucks business, but the short-term impact is minimal. That’s my take. What’s yours?

And yes, I do need to get a life.

No I’m not talking about the re-training of its front-line employees on how to make the perfect coffee drink. I am talking about a video ditty I spied on YouTube. It’s a two-minute documentary of Young Han, a Starbucks barista, talking about his “Got Milk” photo shoot and his appreciation for the Starbucks Coffee Company.

It works great as a recruitment video. Not slick. Not scripted. Just genuine moments and reflections. Have a look…

RSS readers ... click here to watch the video

As we’ve discussed, Starbucks is doing very little to tap into the Third Space communities people are forming online. (Big miss in my book.)

While Howard Schultz may never blog, Starbucks should STRONGLY CONSIDER encouraging its young and talented workforce to post videos of why they feel a connection to Starbucks. They could turn it into a contest similar to Deloitte & Touche’s brilliant Film Fest idea where Starbucks baristas would submit short videos showcasing “What Starbucks Means to Me.” The best 10 videos would be posted on the barren Starbucks YouTube page for all to see.

Each of these top 10 videos would serve as a great recruitment tool for Starbucks. And the creators of these videos could be rewarded in some way, perhaps stock options. A simple idea to execute with potentially big results of attracting a better front-line employee to deliver better customer experiences.

(This is yet another in a series of free ideas from Brand Autopsy and the readers of this blog that Starbucks would be smart to use.)

As we know, Howard Schultz has returned as CEO at Starbucks.  He’s committed to fixing the “unintended consequences” caused by growing its store footprint at a rapid pace.  Such unintended consequences have included losing the company’s identity and the dilution of the unique customer experience Starbucks once delivered.  Howard has also pledged to refocus the company on growing its relationships with customers.

Writing in the Huffington Post, Jesse Kornbluth raises a valid point,

“It's interesting that Schultz professes to love Starbucks customers but has no apparent interest in hearing from us. How's that, Howard? You're going to thrill us without getting our input? Do you really think focus groups, consumer research and executive offsites will tell you what you need to know? What, exactly, do you think the Starbucks website is for?”

Jesse is onto something when he writes, “Schultz professes to love Starbucks customers but has no apparent interest in hearing from us.”

As evidence by their lack of participation, we know Starbucks, as a company, has refused to blog and refuses to participate in online conversations.  The Starbucks Gossip blog is all the proof the company needs to know that people want Starbucks to join the online conversation.  Yet, the company refuses to have a conversation with its customers (and employees) online.

Clearly, Starbucks was ahead of the curve with tapping into satisfying the consumer need of a Third Place—a place besides home and work where people could form community.  But consumers have evolved from needing a Third Place to needing a Third Space.  This Third Space includes social media spaces like blogs, vlogs, podcasts, Twitter, and many more. These are spaces where meaningful online communities are forming.

Now that the company recognizes it needs to improve its relationships with customers to improve the health of its business, maybe Starbucks will consider blogging.

Better yet, given Howard Schultz’s pledge to growing the company's relationships with customers, he should blog.  He should give us, the 50+ million Starbucks customers who visit his stores weekly, updates on how his company is making the necessarily changes to follow his vision for reclaiming the Starbucks luster. 

Howard recently told Wall Street analysts that, since returning as CEO, he has received thousands of emails from customers and employees who share his enthusiasm for reigniting the emotional attachment people have with the Starbucks brand.  With a blog, just imagine how many more messages Howard would receive from adoring customers and employees who want to see the company succeed.

Howard has always talked about growing his company to get bigger by acting smaller.  And a blog, or some other social media avenue, is the perfect tool to help big companies get smaller in customer’s eyes.  Other CEO blogs like Jonathan Schwartz’s blog and Bob Lutz’s blog have helped to make Sun Microsystems and General Motors, both goliath companies, get smaller in the eyes of customers.  And thanks to encouraging its employees to blog, companies like Microsoft look less pervasive and less evil in the eyes of customers. 

Can you imagine the conversations that would occur if Howard Schultz used the Starbucks website to regularly share updates on how his company is bringing back the old Starbucks juju?  I’m sure many of the Starbucks faithful would be thrilled to read impassioned updates from Howard.  I'm also sure Howard would receive pointed feedback (and yes, un-pointed feedback too) on activities the company should stop doing, start doing, and/or continue doing.

Unfortunately, the Starbucks corporate culture doesn’t sync with social media.  My experience of working deep inside the company tells me Starbucks is extremely careful in how they are portrayed in the traditional media.  They want to be in control of the conversation in the media as much as possible.  Since Starbucks is cautious about how traditional media portrays the company, then no way will Starbucks be comfortable playing in the non-traditional untamed waters of social media.  Do I think this is right?  Absolutely not!

Starbucks helped to popularize the “New Marketing” ethos of spending marketing dollars on making better customer experiences and not on making extravagant advertising campaigns.  In essence, Starbucks baked marketing inside its business.  It didn’t have to advertise because everything about the in-store Starbucks experience was the advertising.

Starbucks still operates under this “New Marketing” ethos but the game has evolved dramatically.  A “NOW MARKETING” movement has emerged and Starbucks hasn’t kept up.  This “NOW MARKETING” ethos is the realization of the prophetic Cluetrain Manifesto where the Internet has changed how customers expect to interact with businesses.  As the Cluetrain writers explain:

"A powerful global conversation has begun. Through the Internet, people are discovering and inventing new ways to share relevant knowledge with blinding speed. As a direct result, markets are getting smarter—and getting smarter faster than most companies."

In growing its business, Starbucks has always operated under the guidance of “Be everywhere its customers expect them to be.”  This is the rationale for why the company began serving its coffee on United Airlines, expanding Internationally, operating licensed concept locations in airports, selling cold bottled coffee in convenience stores, selling whole bean coffee in grocery stores, etc.

Customers today have a new expectation. 

Customers now expect Starbucks, and other businesses, to engage in conversations with them wherever and whenever.  Be it in the Third Place or the Third Space, customers want to interact with businesses they love.  By being active in the Third Space online, companies show their love for customers by being open to having a conversation with them. 

If Howard Schultz really loves his 50+million weekly customers, he would show it by evolving his company’s culture to adopt the “NOW MARKETING” movement.  If Howard Schultz really loves Starbucks customers, he must blog.  He must carry on a conversation with us.

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UPDATE:  This blog post has been simmering within me for a few weeks.  After hitting the publish button, I ventured over to the Starbucks.com site and hidden in the bottom right-hand corner is a "Howard Schultz Partner Update" link.  This particular update is titled. "What I Know to Be True."  Interesting.  Seems like Howard is using the company website to share his impassioned updates with customers and employees.

Also posted are are transcripts of voicemails to stores regarding the work ahead of the company. 

Of course, it would be better if Starbucks were to open up the conversation, allow comments from readers, and commit to making this an on-going feature.  That way, Starbucks would be embracing the "NOW MARKETING" movement we have come to expect from businesses we adore.

Check out Chris’ tasty riff in the comments section of my Starbucks One-Dollar Cup o’ Joe post. This reference had me laughing …

“If Howard, like John Cusack holding the tape player outside the window in "Say Anything," is using this a tactic to make me pay attention so that he can look deep in my eyes and tell me he's sorry--I might listen if the words and actions seem sincere and real change follows.” [source]

And that reference inspired “Bobby Breve” to send me this visual. Beautiful. (Thanks Bobby.)

Starbucks CEO Howard Schultz once said, “Our marketing will emphasize quality and service, not price.” He’s now doing something different.

In a bigger shift in marketing strategy than spending millions on national television advertising, Starbucks is now selling short-sized cups of brewed coffee for a $1.00 and offering free refills at Seattle-area locations. (Reuters link | WSJ link)

Oh My! That is a MAJOR shift in strategy for Starbucks. Here’s why…

“Starbucks fiercely protects its pricing power because it knows a low-price strategy is the quickest pathway to commoditizing and marginalizing coffee back to being, well, just coffee. It also knows if it lowers prices, it will have a hard time ever raising them again. Most important of all, Starbucks knows higher prices bring them healthier profit margins, which fuel the cozy experience customers enjoy.

By ever deciding to run itself as a priced-to-sell retailer, Starbucks would be admitting it no longer values a unique product or a unique customer experience. Seth Godin, author of Purple Cow, goes one step further, saying that a low-price strategy is “the last refuge of a…marketer who is out of great ideas.” The folks at Starbucks are too smart, too savvy, and too creative to fall for the low-price trap. And if they ever did, Starbucks as we know it—Starbucks as a forward-thinking company—would cease to exist.” SOURCE

Those words were written in TRIBAL KNOWLEDGE, my love story to a company that shaped how I approach marketing. In my eight-years there, we, Starbucks marketers, would have never considered promoting a $1 Cup o’Joe to increase sales. Instead, we would have used of a combination of these ideas to solve for Starbucks problems.

A "cheap coffee strategy" ... Oh My! is right; because, a low-price strategy is indeed the quickest pathway to commoditizing and marginalizing coffee back to being, well, just coffee.

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UPDATE: For an editorial-like cartoon on this "One Buck" Buck strategy, peep this.

Last year about this time Micheal Dell returned to his CEO post at the company he founded. Under Kevin Rollins’s CEO leadership, Dell’s market share hit a four-year low and growth prospects were grim. Rollins resigned and Dell reclaimed his CEO role.

Last year about this time Howard Schultz sent a memo to his Starbucks executive team challenging them to get smarter about how they are running the company and to get back to the company's core business. Starbucks CEO Jim Donald was charged with driving sales and driving innovation at the company. In 2007, Starbucks stock value fell 48% and the company reported its first every year-over-year drop in customer traffic. Donald is out and Schultz is back as CEO.

The jury is still deliberating on Michael Dell and the turnaround of his company.

The jury is just convening about Howard Schultz and the turnaround of his company.

For the most riveting and rambunctious discussion about this unexpected CEO change-over at Starbucks, read the comments on the Starbucks Gossip blog.

Sensing an opportunity to further democratize espresso, McDonald’s is moving full throttle into the espresso beverage business. Currently, 800 of McDonald’s U.S. locations offer lattes, cappuccinos, and frappes. By 2009, most U.S. McDonald’s locations will be selling coffee drinks ranging in price from $1.99 to $3.29. McDonald’s believes an expanded coffee menu will add about $1-billion in yearly sales.

Writing in the Wall Street Journal, Janet Adamy reports,

The program attempts to replicate the Starbucks experience in many ways -- starting with borrowing the barista moniker. Espresso machines will be displayed at the front counters, a big shift for a company that has always hidden its food assembly from customers. McDonald's says it wants customers to see the coffee beans being ground and baristas topping the mochas and Frappes with whipped cream.

"You create a little bit more of a theater there," says John Betts, McDonald's vice president of national beverage strategy.

The theater element, of having employees preparing food while interacting with customers, is a major shift in company culture for the operationally-efficient McDonald’s system. In the article, Adamy mentions how McDonald’s franchisees have been instructed to hire people who are “very friendly.”

That’s a start to bringing more theatrics to a customer’s McDonald’s experience, but why is hiring “very friendly” people a new behavior for McDonald’s? (Hmm.)

The people component to delivering customer experiences is ultra-important to McDonald’s — more important than the actual coffee beverage program. Why? Because Starbucks competitors can replicate products and programs, but they can’t replicate people.

In TRIBAL KNOWLEDGE, my book sharing business lessons I learned from Starbucks, I wrote about this topic saying …

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Ambitious coffee competitors like Caribou Coffee, Cosi’s, Tully’s Coffee, Gloria Jean’s, Barnies, CC’s Coffee House, and others have all tried to mimic Starbucks success in some way. And they have all fallen short in some way.

These coffee companies have tried and are trying to replicate the products and experiences Starbucks delivers, but they can’t replicate the people Starbucks has delivering the products and experiences to customers.

Products do not create brands, people create brands. It’s the people that matter more in creating a brand than the product itself. And Starbucks places a tremendous emphasis on hiring the right people to deliver exceptional products and meaningful experiences to customers.

When hiring employees for store-level and corporate-level positions, Starbucks looks for the following upstanding “people” qualities in each candidate: genuineness, conscientiousness, knowledge, and involvement.

Genuineness
Genuine people build solid relationships with others because they are approachable and likeable. Starbucks employees who are genuine make for great team members, and they can be trusted to deliver heartfelt customer service.

Conscientiousness
A conscientious employee is one who is considerate and pays attention to seemingly insignificant details because everything matters to them. And since “everything matters” at Starbucks, this quality is of utmost importance in all employees Starbucks chooses to hire.

Knowledge
Starbucks employees are expected to know coffee to the extent that they will confidently share their coffee knowledge with customers. To find employees with this quality, Starbucks looks for people who ask questions. Asking questions at Starbucks is not a sign of weakness. It’s a sign of strength. Inquisitive employees lead to knowledgeable employees and knowledgeable employees are quicker to share their expertise with others.

Involvement
Employees who get involved within the company and within their community are valued at Starbucks. When employees take the time to get involved and make connections with others, they showcase a caring soul. Starbucks seeks to hire caring souls because they are more likely to make emotional connections with people.

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Even if McDonald's can successfully change its company culture to hire engaging employees, it still must solve for how to integrate its highly-involved coffee program with its streamlined operations customer have come to expect.

As Adamy writes, “Still, the new coffee program is a risky bet for McDonald's. It could slow down operations and alienate customers who come to McDonald's for cheap, simple fare rather than theatrics.”

As a leading authority on customer evangelism and word-of-mouth marketing, Jackie Huba has added her voice to the discussion about the problems Starbucks is facing. She highlights how Starbucks losing its authenticity has driven the company from using customers as its primary advertising vehicle, to using national television commercials as an advertising vehicle.

Back in March, Paul Williams and I dissected many of these authenticity issues Starbucks faces in a series of back-n-forth blog posts. Together, Paul and I have a combined 19-years of marketing experience with Starbucks and we tapped into that experience to talk strategies and tactics Starbucks could follow to reclaim its authenticity.

At the time, we were responding to Howard Schultz’s leaked internal memo where he admitted that Starbucks has “… had to make a series of decisions that, in retrospect, have lead to the watering down of the Starbucks experience, and, some might call the commoditization of our [Starbucks] brand.”

Our series of posts have been given new relevance since Starbucks has decided to use national television advertising to solve some of its business problems. Re-read, or read for the first time, the laundry list of strategies and tactics Paul and I believe Starbucks could implement to become the company it once was.

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We began by addressing the LOSS OF COFFEE THEATRE issue:
Paul analyzed the switchover from the La Marzocco espresso machine to the Verisimo automatic machine and offered up tactical ideas Starbucks can use to course-correct itself back to espresso authenticity. I riffed off Paul’s post and added the idea Starbucks needs to give permission to store partners to showcase their flair and personality while on the bar in order bring some of the coffee theatre back.

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Next on our list was the LOSS OF COFFEE AROMA issue:
I explain in detail how “operational efficiencies” (not Flavorlock packaging) have led to Starbucks stores no longer smelling of coffee. I offer the quick-fix solution of finding ways to grind coffee in-store again. Paul disagrees with my exoneration of Flavorlock packaging and he smartly offers up the idea of implementing an “Aroma First” rule. This “Aroma First” rule would have Starbucks making in-store decisions based upon how any proposed activity would impact the aroma of coffee inside a Starbucks.

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We also addressed the LOSS OF STORE SOUL issue:
Paul breaks down what it means to be a Mom & Pop shop and gives specific ideas on how Starbucks store design should stop being all things to all people at all its stores. I offer up thoughts on how Starbucks should give more control to its stores to run store-specific marketing programs and post store-specific marketing signage.

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We touched upon the LOSS OF MERCHANDISE focus:
I explain how Bearista Bears and Finger Puppets sell very well, but it a great cost to the brand. As a solution, I propose Starbucks ask itself two questions to ensure its merchandise focus: (#1) Does the product link directly to coffee? If yes, sell it. If no, don’t. (#2) Does the quality of this product match the high-quality of Starbucks coffee. If yes, sell it. If no, don’t. Paul adds-on and modifies my two questions by asking if the merchandise links directly to either the preparation, consumption, and/or enjoyment of coffee. He closes his thoughts by expressing just because Starbucks can sell music, DVDs, and plush toys doesn’t mean they should.

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We close by addressing the LOSS OF IDENTITY issue:
Paul likens Starbucks returning to its core to restoring antique furniture to its core, original finish. He also brilliantly points out Starbucks needs LESS INNOVATION and MORE EXPLORATION. Starbucks didn’t invent coffee, it explored the world of coffee and brought interesting flavors to its customers. Paul says Starbucks should concern itself with digging deeper into the world of coffee and uncover exotic coffee concoctions and share them. I take the IDENTITY conversation in a different direction and explain how Starbucks needs to standup to the bullies working on Wall Street by pruning all of its unhealthy growth in order to rejuvenate its soul and refertilize its reason for existing.

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For even more ideas on how Starbucks can solve its business problems, read what myself and a cadre of other marketing-minded folks have to say in the WHAT MUST STARBUCKS DO? manifesto published online by ChangeThis in April of 2007.

UPDATED [Nov. 27]: Starbucks has posted all three of their Holiday television commercials online. You can view them here.

The "Bear Hug" and "Window Washer" spots continue the good Samaritan "Pass the Cheer" angle with the major difference being the focus on the Starbucks Red Cup. The Red Cup is so much more recognizable as being Starbuckian than is the red Christmas Blend whole bean bag (seen in the Ski Lift ad).

As a marketer, I would like the closing shot on these two spots to linger a little longer. Both of these new commercials close with the Red Cup holiday beverage focus. However, the closing payoff shot feels rushed. Not enough time for us viewers to read, understand, or connect with the copy on the draped banner. They could have easily shaved off a second or two in the build-up and added it to the closing payoff shot for more effectiveness. Have a look for yourself. Click below...

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>> original post <<
Lots of c-h-a-t-t-e-r about the television spots Starbucks is running. I haven't seen them on the tele, but Starbucks has posted one spot online.

Click below to watch the commercial....

Hmm ... okay. Starbucks waited 36-years for this? It's nice. It's benign. It's subtle. Can't see how this spot will drive in new customers, nor drive current customers to come in more often during the Holidays. (And yeah, I know this is just one component to the overall Starbucks Holiday promotion.)

What's your take? Does this television ad make you feel any different about Starbucks? Does it make you want to visit a Starbucks and buy some Christmas Blend?

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UPDATE:

In the comments section, Scott questions how this TV spot syncs up with Starbucks brand identity.

Great point. The missing ingredient of Starbucks first national television commercial is brand identity. This spot feels more appropriate for Caribou Coffee than it does Starbucks. (For those unaware, Caribou Coffee is the second largest coffee retailer in the US. According to Wikipedia, Caribou has over 460 locations in 18 states.)

Caribou's brand identity is wrapped around the cozy ski lodge concept as well as the leaping deer in its logo. The in-store décor of a Caribou Coffee location is reminiscent of a ski lodge, complete with exposed weathered wood and comfy chairs around a fireplace. (Photos here, here, and here.)

The leaping deer, which easily passes for a reindeer during the Holidays, is as iconic to Caribou as the Siren is to Starbucks.

Additionally, Caribou uses a pastel aqua-blue color as part of its brand identity.

So upon further review, this commercial from Starbucks works better for Caribou Coffee than it does for Starbucks. Ski scenes are more associated with Caribou than Starbucks. A deer is more linked to the Caribou brand than the Starbucks brand. Caribou’s color scheme has always been drenched in an aqua-blue color, while Starbucks color scheme hasn’t.

Upon even further review, this Starbucks commercial fails the “Logo Test.” If we were to swap out the Starbucks Christmas Blend bag at the end of the spot and replace it with Caribou’s Reindeer Blend, the commercial would still work just fine. Anytime you can swap out your logo for a competitor’s logo in any piece of marketing collateral and it looks fine, you have a problem.

So ... Starbucks, with its first national television commercial, has made a great ad for Caribou Coffee.

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UPDATE: Click here to watch one of the Starbucks Holiday commercials.

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What?
On a conference call with Wall Street analysts, Starbucks Coffee revealed fewer customers are visiting its stores and that year-over-year sales are stagnant. The company reported a 1.0% drop in customer traffic as compared to the same period last year and despite two price increases, same store sales increased only 4.0% from the year prior.

In response, Starbucks announced a three-point plan to reverse their sluggish financial numbers. First, the company will attempt to sharpen its store-level operations to better deliver the “Starbucks Experience” customers have come to expect. Second, the company will focus on introducing new beverages that are more innovative and more appealing to customers. Third, Starbucks will launch a national television advertising campaign in hopes of driving new customers into its stores as well as getting current customers to visit more often.

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So What?
Since being a publicly traded company, Starbucks has never experienced a reduction in customer visits. Remarkably, they have always had more customers visiting its stores … until now. This is uncharted territory for Starbucks. And Starbucks is concerned.

Additionally, for nearly a decade, year-over-year sales at Starbucks have been very strong—anywhere from 7.0% to 13.0%. So the current trend where comp sales are stagnate in the low single-digits is quite alarming for Starbucks.

For many companies, the answer to the question of, “Sales are down and customer counts are falling, what should we do?” is to spend marketing dollars on creating a television-heavy advertising campaign. That hasn’t been the answer at Starbucks.

Starbucks has always followed the unconventional strategy of using its in-store experience as its main marketing tool. Everything about the Starbucks experience marketed the Starbucks business: the coffee in the iconic white logo cup, the personal interaction between a customer and a Starbucks barista, the in-store decor, the music playing overhead, the welcoming smell of the coffee, and the feeling customers had during their Starbucks “moment.”

As noted in the conference call, Starbucks will continue down the unconventional path of spending marketing dollars to improve the customer’s in-store experience through better store operations and more appealing beverages.

But now, the company has also decided to follow the more conventional path to arresting declining sales through launching a television advertising campaign. According to Ad Age, we can expect to see three Holiday-focused animated 30-second spots running on select cable channels and network television channels.

This dramatic change in marketing strategy goes to show us how seriously the company is taking the soft comp sales and declining transaction comps. Starbucks is willing to risk its go-to-market strategy by spending significant monies on television ads to lure customers during the Holiday season.

To this marketer, it’s a little foolish to spend advertising dollars on television during the Holiday season without going all-out. I doubt Starbucks is putting mega-millions behind this television push. With so many retailers spending mega-millions on television advertising during the Holiday shopping season, the limited advertising spend from Starbucks is sure to get lost in all the ad clutter. Plus, I get the feeling these commercials will be go hard on pushing the relevance of the Starbucks brand during the Holidays and go very soft on selling specific products.

A smarter spend for Starbucks would be to go all-out during the Spring/Summer months and use television advertising to promote their promotion-friendly Frappuccino blended beverages. Starbucks has always treated their Frappuccino drinks as being more promotional than their other coffee drinks. For years, Starbucks has done regional radio, billboard, and print advertising to support their Frappuccino portfolio. They’ve come to believe this advertising push positively impacts sales and drives in new customers.

So why doesn’t Starbucks wait until the Spring/Summer months to go all-out with national television advertising? With sales already sluggish and customer traffic trending downward, the company doesn’t want to get too far behind their FY’08 sales goals. Keep in mind, Starbucks will generate around 25% of its 2008 sales during the six-weeks of Holiday. If the company falls behind early in hitting sales targets, 2008 could be a very rough year.

I believe this national television advertising push is a sign Starbucks is desperate to drive sales. Desperate enough to turn its back on the marketing strategy that has made Starbucks what it is today.

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What Now?
We all get to sit back, watch the television commercials, and watch to see what impact this new marketing direction has on the Starbucks business and the Starbucks brand.

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Want More?
Consider reading the What Must Starbucks Do? Manifesto. In April, I, along with a handful of other Starbucks customers, published a manifesto loaded with ideas on what Starbucks must do to reclaim its uniqueness, to better connect with customers, and to become the coffee company it once was. Read it again. Or, read it for the first time. >> MORE <<

If your appetite for mulling over Starbucks strategies is insatiable, you should review the series of posts Paul Williams and I did earlier this year. In this series of back-and-forth posts, we talked strategies, tactics, and shared some insider knowledge based upon our combined 19-years of marketing experience at Starbucks. Start here and work your way backward. Or, start here and work your way forward.

And of course, Jim Romenesko's Starbucks Gossip blog is all over this.

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Taylor Clark’s STARBUCKED: A Double Tall Tale of Caffeine, Commerce, and Culture is receiving lots of positive ink. The Wall Street Journal loved it. As did the San Francisco Chronicle. It’s being positioned loftily as a “Part Fast Food Nation, part Bobos in Paradise” treatise on coffee and capitalism.

Taylor’s book is interesting reading but not necessarily mandatory reading for business folk and cultural studies folk. He traces the Starbucks story well from its inception in 1971 to its impact in 2007. However, it lacks punch.

(Keep in mind, I’m very close to this story having spent my formative marketing years working at Starbucks Coffee as well as written a book about what I think makes Starbucks a successful business.)

In expected alt-weekly journalism fashion, Taylor, a former writer with Portland’s Willamette Week alt-weekly, runs down the same old story of Starbucks opportunistic and capitalist ways.

Yes, Starbucks is hyper-competitive. Yes, Starbucks seeks prime real estate locations. Yes, Starbucks could do more to support coffee farmers. Yes, Starbucks added sizzle to the experience of drinking coffee. Yes, the familiarity of Starbucks brings about opinions of homogenization. Yes, Starbucks charges an ungodly premium for its coffee drinks. Yes, Starbucks has a strong corporate culture ethos. That we know.

While I found much of Taylor’s book to cover well-trodden territory, he managed to talk with lots of former Starbucks executive heavies. And the quotes these ex-Starbucks higher-ups shared with Taylor are at times fascinating. I wasn’t expecting to read such sulliable and ego-laden quotes. Which leaves me wondering if these past Starbucks execs weren’t Starbucked.

Taylor caught Howard Behar, former big-time Starbucks exec and current Starbucks board member, with some choice comments When asked about Howard Schultz’s vision of selling espresso beverages back when relatively few people could pronounce it, much less enjoy the taste of it, Behar is quoted as saying, “Howard will always say he knew this would work, but he’s full of shit. We didn’t know how it would turn out.” (p. 53)

When the topic of Tom O’Keefe, founder of regional coffee competitor Tully’s, comes up, Behar is quoted as blurting out an emphatic, “Fuck him.”(p. 128) And when Behar talks about critics referring to the taste of Starbucks coffee as burnt, he’s quoted as saying, “What used to piss me off was when they’d say ‘Charbucks.’ That’s like walking into a gallery and saying, ‘Your art is shitty.’” (p. 70)

Scott Bedbury, former Starbucks Marketing VP, provided Taylor with some choice fodder as well. In talking about the role quality espresso drinks play at Starbucks, Bedbury is quoted as saying, “To be honest, you could train a monkey to pull a double-shot. It’s just not that hard.” (p.88)

Engle Saez, another former Starbucks Marketing VP, shared some candid comments about Starbucks true competitive advantage. Taylor quotes Saez as saying, “Starbucks doesn’t have a lockdown patent on the environment; it doesn’t have a lockdown patent on the experience; and it doesn’t have a lockdown patent on the bean or the roast. All of those things can be duplicated. So what it comes down to is the dominance of real estate. That’s the one area where no one can out muscle Starbucks.” (p. 115)

You’ll have to read the book to take in more choice candid comments from past Starbucks players. Starbucks insiders will get a kick outta how Taylor portrays former Starbucks Real Estate head Arthur Rubinfeld. (Oh my.)

Taylor and I actually spoke some months ago when he was in the process of writing STARBUCKED. I do not recall much about the conversation we had except the writer seemed young and guarded about the angle he was taking with the book. The quotes Taylor includes in the book from me are benign. Then again, I’ve already shared lots of pointed comments about Starbucks on this blog and Taylor had many former executive-level Starbucks people eager to riff about the company they once worked for.

Kudos to Taylor Clark for getting ex-Starbucks folks to open up and share some off-brand and at times, acrimonious remarks. I’m sure some of these folks will not be pleased with how they are portrayed.

As far as STARBUCKED being a book business enthusiasts would find worthwhile, I don’t think so. Just not enough business knowledge nuggets for us business wonks to learn from. However, the cultural studies crowd might find this book somewhat worthwhile … just not near as worthwhile as Fast Food Nation or Bobos in Paradise.